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Editor's Note: Shah was bullish throughout 2020, and he's expecting this year to be even bigger as the pandemic ends. He's said it's entirely possible for the Dow to hit 35,000 in the next 12 months. To help you capture and capitalize on that incredible potential, Shah's put together a list of stocks to buy in 2021...
There's an old adage that the sequel is almost never as good as the original.
That's been proven time and again with movies, theater, music, and books.
But not the stock market. At least not this stock market.
After a nine-month stretch during which stocks rebounded more than 65% - and set record highs an average of every eight trading days - I'm predicting one hell of an encore in 2021.
I'm talking about a sequel that absolutely smokes the original.
Here's what you need to know about where stocks are headed in the new year, the specific stocks I'm watching - and how to rake-in piles of easy money...
Look Where We've Been to See Where We're Going
Truly great sequels like this one don't require a drawn-out introduction. But a little bit of backstory can do some "scene-setting."
So before I "handicap" what I'm predicting for 2021, a quick look back at 2020 is in order.
Why? Because 2021 is going to ride the waves of the rebound ignited in 2020. I'm talking about the catalysts that fired up investors last year, the trends that were sown there, and the opportunities that bloomed like wildflowers. Not only are those trends all intact - they're in full bloom and spreading.
"I'LL SHOW YOU what to consider buying, what to sell, and EXACTLY how to do it with less than $500, all right here."
We came into 2020 with one of the strongest economies in recent memory and a momentum market that had seen 2019 gains of 23.76% in the Dow Jones Industrial Average, 30.43% in the S&P 500, and 37.89% in the tech-focused Nasdaq.
As 2020 debuted, stocks continued their run - and made all-time highs in February.
The market was trending higher, and there was little to stop it. An existential threat to mankind, however, is no small impediment: COVID-19 dynamited the uptrend.
Ironically, it also provided the solution.
The $1,200 "stimulus" checks and $600 weekly jobless benefits were designed as "distress relief" payments, but ultimately, they ended up as portfolio "seed money."
This cash ignited a bounce-back bull market. And it transformed the way we invest along the way.
With a speed even I found truly stunning, millions of new brokerage accounts were opened across the country. Robinhood Markets, the originator of commission-free trading and what I've nicknamed the "Fractional Shares Revolution," grabbed up a record $3 million in new accounts in a mere three months, according to industry statistics. E*Trade, TD Ameritrade, Charles Schwab, and Fidelity opened up millions of new accounts, too - lassoing the pandemic-housebound, middle-aged, and mostly younger Americans who were ready and eager to dive into stocks.
That's where the buying came from at the end of March: These "retail renegades" ignited an uptrend that rescued stocks, and millions of Americans, from the bear-market abyss.
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And for the first time I've ever seen - and, remember, I've been doing this for a very long time - the investment pros on Wall Street were left in the dust.
With plenty of catalysts out there already and on the horizon pushing powerfully trending markets, making money is going to be easy in 2021.
Here are the catalysts I see.
And here's how you can best cash in on them.
Here's How to Get Ready for a Dynamite Year
2021 Prediction No. 1: Stimulus Cash Will Keep Flowing into Stocks
If you've followed my work for any length of time, you've heard my main mantra: "There's always a place to make money - always." It's a key part of my core belief system. And it has to do with money flows.
Money flows - liquidity - drives asset prices. If you understand where money is flowing, you know where the opportunities are.
And money flows are a crucial point here.
Take the stimulus. Last year, Washington pushed $2.2 trillion into the economy.
The Biden administration, encouraged by the party's far-left modern monetary theory advisors, will spend, spend, spend.
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And no matter where you stand on fiscal responsibility or deficits or the national debt, the flood of spending we're about to see will rocket stocks even higher.
There's more "stimulus" coming - $900 billion worth. Look for much of that helicopter money to go into brokerage accounts and then into stocks.
That's the definition of a "catalyst," and it's what will ensure that stocks already in an uptrend will just keep trending higher. As I mentioned, with plenty of catalysts out there already pushing powerfully trending markets, making money is going to be easy, particularly if you own these...
Clean Energy Fuels Corp. (NASDAQ: CLNE) will be a fantastic stock to own as Democratic spending priorities kick in. In fact, it's up around 214% in the last three months or so - with much more to come. "Alternative" energy, which is rapidly becoming "mainstream" energy, is going to shine brightly this year as government dollars pour in.
U.S. Lime & Minerals Inc. (NASDAQ: USLM) is another likely standout in 2021, for the simple reason that we can expect more, more, more infrastructure spending under a Biden Administration and a Democratic House - and should the Democrats take the Senate in tomorrow's Georgia runoff elections, the path forward to this spending is that much easier. U.S. Lime & Minerals manufactures and sells lime and limestone products, two essential substances for any infrastructure buildout.
Rio Tinto Plc. ADR (NYSE: RIO) is the second largest metals and mining corporation on the planet. Iron ore, copper, diamonds, gold, uranium - if it's in the ground and it's valuable, odds are Rio Tinto is there. Along with U.S. Lime, think of this as a play on the fundamentals of infrastructure buildout - the "ground floor," so to speak.
2021 Prediction No. 2: The Market Will Be a Magnet to the "Money on the Sidelines"
In 2020, that sideline fuel came to stocks courtesy of retail investors. Now it looks like the investment pros will be joining the party - transforming what had been an enjoyably raucous financial concert into a full-blown rave.
Inflows into U.S. stock funds in a single week in mid-December approached $30 billion - the fifth-highest total ever, says EPFR Global. One measure of investors' equity exposure is at a two-decade high, CNBC reported.
And there's a lot of "dry powder" on the sidelines.
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There's an additional $2.1 trillion of cash outside the financial sector on the books of S&P 500 firms, says Joyce Cheng, head of global research for JPMorgan. She's forecasting $1 trillion of stock inflows/demand in the new year, courtesy of systematic flows, hedge-fund positioning, retail buying, share buybacks, and rotation from non-stock assets, she told CNBC.
Then there are the money-market funds, where balances are about a trillion dollars higher than they were before the early-year "COVID-19 Crash." With yields at zero, investors could look to stocks to replace the usual money markets, CDs, and bonds.
Finally, there are "special-purpose acquisition companies," or SPACs - with about $150 billion in cash. That's money that must be used for a deal within two years of the fund's creation. In a similar - albeit, murkier and harder-to-read realm - private-equity funds are sitting on cash hoards that are many times this amount. All of this is fuel for stock-price-boosting buyouts.
In other words, it's all about money, money, money! And the best way to profit from money itself? Financial stocks, like banks.
I'm partial to Wells Fargo & Co. (NYSE: WFC) which, as we all know, lagged behind its sector-mates in 2020. The shares have been on a 42% ride higher since November 2020, however, which speaks of gathering momentum. I think the flood of money pouring in from the sidelines will most definitely lift Wells' boat; it'll be compelled to move higher this year, and you should be along for that trip.
Momentum, in fact, will be behind lots of great trades and stock buys in 2021, in huge, ultra-liquid, mega-cap stocks like Apple Inc. (NASDAQ: AAPL), Amazon.com Inc. (NASDAQ: AMZN), and Microsoft Corp. (NASDAQ: MSFT). These stocks will have the momentum of a speeding 200-car freight train; institutional money will chase them higher because of the liquidity they offer. Another "E-ticket" ride every investor should be on, all the more so because, thanks to the "Fractional Shares Revolution," it's never been easier for regular folks to own "pieces" of these otherwise pricey companies.
SPAC money will have plenty of momentum behind it, too. I expect the startup scene to be red hot this year, as companies move in to tackle problems caused by the pandemic, or build on success they had fighting the pandemic. These newly popular SPACs are essentially the new way for companies to make an initial public offering. Normally, regular investors are frozen out of these debuts, but thanks to SPACs, there's a way for all of us to participate in the best IPOs while avoiding the dogs. Big financial companies like Evercore Inc. (NYSE: EVR) and Morgan Stanley (NYSE: MS) will be pulling a lot of the strings behind SPAC activity in 2021... and pulling in lots of profits.
2021 Prediction No. 3: The "Rotation Trade" Will Help Push Stocks Higher
Traders and investors are rotating out of mega-cap tech stocks, paring positions in "work from home" stocks and other highfliers positioned to prosper as paradigm shifts change the world we live in, and plowing money hand over fist into "value" stocks. While definitions of value abound, value means cheap in the rotation trade.
Stocks of companies wounded by the depressed economy, by lockdowns, by the recession, because of a lack of visibility into their revenue prospects and earnings potential, were mostly left for dead. Not anymore.
With vaccines being rolled out, with the other side of the pandemic in sight, with the economy in rapid recovery mode, those value stocks look ripe for the picking.
The positive here is that the rotation into value stocks increases the "breadth" of rallying stocks, meaning it's not just a handful of tech stocks driving benchmark indexes higher - stocks in every sector of the market are getting bought up. That creates a broad and more stable base from which stocks can keep climbing higher.
That supports the trend.
To really capitalize on a rotation like this, investors have to step up and take some risk on beaten-up sectors, where the recovery will be most intense. In 2021, U.S. Global Jets ETF (NYSEArca: JETS), which tracks a huge segment of the (extremely) downtrodden aerospace and travel sectors, makes sense as a rotation target and candidate for recovery. Expedia Group Inc. (NASDAQ: EXPE) and Airbnb Inc. (NASDAQ: ABNB) make for two more excellent speculative plays as travel begins to recover.
To play the broader economic recovery I'm expecting in 2021, grab the iShares Russell 2000 ETF (NYSEArca: IWM), which of course tracks the small-cap-centric Russell 2000 index. Many of America's best up-and-coming businesses live in the small-cap space, where companies are capitalized at between $300 million and $2 billion. The IWM's pandemic performance was strong - it nearly doubled from its March 2020 lows - and when the pandemic ends, the gloves will come off and we'll likely see some staggering growth there as America gets back to normal.
Look, these are just a few stocks to get you started in 2021. If the market moves like I'm predicting - as it very well should - there'll be no shortage of ways for regular investors to cash in.
My biggest prediction for 2021 is also one of my boldest. I'm looking for a $353 billion "capital wave" to possibly plow into five specific companies over the next 18 months. So there are five more stocks to look at, and you can do that here...
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.